Suspense Account in Accounting Error

 

Suspense account

Suspense account is a dummy or temporary account.

It is opened by an accountant to transfer the difference in trial balance.

It is opened when he is in hurry to check all the accounts.

Suspense account is called as a dummy account because it does not open any account.

It is prepared for convenience.

It is prepared to tally the trial balance.

This account is also used to treat some uncertain and incomplete transactions till their certainty.

 

Preparation and disposal of suspense account

Suspense account may have opening debit or credit balance.

Suspense account is opened with the difference in trial balance amount.

According to journal entry, one-sided errors amount is debited or credited.

When such errors are corrected, suspense account is closed.

There should not be any balance in the suspense account.

If suspense account cannot be closed, the balance amount is taken to the balance sheet.

Debit suspense balance is shown in assets side and credit suspense balance in liability side.

 

Keep in Mind (KIM)

Suspense account is written or prepared when errors are located after preparing trial balance. Suspense account is maintained for one sided error. If there is cash in rectified entry, we should write down suspense account in place of cash.

 

PROBLEM: 13A

Following information is given to you after preparing trial balance:

Cash received from Manoj $/₹/Rs 45,000 was debited to his account.

Required: Rectified journal entry

[Answer: Suspense debited by 90,000]

SOLUTION:

Given and working note:

Step 1,				÷	Step 2,
Correct entry
Cash                            To Manoj	Dr	45,000	45,000		Manoj      To Cash	Dr	45,000	45,000

Again, correct entry just copy and paste but wrong debit entry credited and wrong credit entry debited

Step 3,					Step 4,
Correct entry				x	Wrong entry
Cash                            To Manoj	Dr	45,000	45,000		Cash      To Manoj	Dr	45,000	45,000

Step 5,

Rectified Journal Entry

Date	Particulars		LF	Amount Dr	Amount Cr
	Cash Suspense account           To Manoj’s account (Being- cash received from Manoj wrongly debited to his account, now rectified)	Dr		90,000	90,000

 

Keep in mind

In two sided error after preparing trial balance, if there is cash either in debit side or in credit at final journal entry, we must write suspense account in place of cash.

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = 

 

Problem: 13B

The following errors were identified after preparing the trial balance.

(a) Suspense account has credit balance Rs 570.

(b) Purchase account (cash purchase) was under cast by Rs 250.

(c) Rs 500 received from Kapil was debited to his account

(d) Goods sold to Gopal Rs 750 in cash correctly entered in the sale book but has been debited to his account as Rs 570.

Required:   (1) Journal entries to rectify the errors; (2) Suspense account

[Answer: Total suspense = 1,000]

SOLUTION:

Rectified Journal Entries

Date	Particulars		LF	Amount Dr	Amount Cr
a.	Purchase account           To Suspense account  (Being- purchase book was under casted is transferred to suspense account)	Dr		250	250
b.	Suspense account           To Kapil’s account (Being- cash received from Kapil was debited to his account, now rectified)	Dr		1,000	1,000
c.	Gopal’s account           To Suspense account (Being- goods sold to Gopal was under recorded by (750 – 570) = Rs 180, now rectified)	Dr		180	180

Suspense Account

Particulars	Amount	Particulars	Amount
To Kapil’s account	1,000	By Opening balance By Purchase account By Gopal’s account	570 250 180
	1,000		1,000

 

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Given and working note:

Purchase book was under cast by Rs 250.

Step 1,					Step 2,
Correct entry				÷	Wrong entry
Purchase                To Cash	Dr	500	500		Purchase           To Cash	Dr	250	250

Again, correct entry just copy and paste but wrong debit entry credited and wrong credit entry debited

Step 3,					Step 4,
Correct entry				x	Wrong entry
Purchase                To Cash	Dr	500	500		Cash           To Purchase	Dr	250	250

 

Rs 500 received from Kapil was debited to his account.

Step 1,					Step 2,
Correct entry				÷	Wrong entry
Cash             To Kapil	Dr	500	500		Kapil           To Cash	Dr	500	500

Again, correct entry just copy and paste but wrong debit entry credited and wrong credit entry debited

Step 3,					Step 4,
Correct entry				x	Wrong entry
Cash             To Kapil	Dr	500	500		Cash           To Kapil	Dr	500	500

 

Goods sold to Gopal worth Rs 750 is recorded Rs 570

Step 1,				÷	Step 2,
Correct entry
Gopal                     To Sales	Dr	750	750		Gopal           To Sales	Dr	570	570

Again, correct entry just copy and paste but wrong debit entry credited and wrong credit entry debited

Step 3,					Step 4,
Correct entry				x	Wrong entry
Gopal                     To Sales	Dr	750	750		Sales           To Gopal	Dr	570	570

 

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